Study Shows Pharmaceutical Industry Investing In Basic Research, Some Questions Remain Open

Basic research in health is often conducted by public universities or institutions, and public health activists have underlined the view that because research is funded by public money, medicines should not be so highly priced. A new study by an independent economic research institute shows that the pharmaceutical industry is a substantial partner in research activities and its investment in basic research is growing. The study, however, falls short of providing answers to key questions such as what is included in research and development figures, or what kind of basic research is conducted.

Dennis Ostwald, Greg Perry

During the 28th session of the Standing Committee on the Law of Patents (SCP) at the World Intellectual Property Organization, the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) organised a side event to launch a new study [pdf] “Understanding Public and Private Funding for Pharmaceutical R&D [research and development]: Does Society Really Pay Twice?.”

The study was published by a German think-tank called WifOR.

Dennis Ostwald, one of the co-authors of the study financed by IFPMA, said the project sought to explore a number of questions such as the extent to which the pharmaceutical industry contributes to global basic research, and how much business invests in basic research.

Among the key findings is that the research shows that global gross domestic expenditures on R&D in 2014 amounted to almost US$2 trillion, about 1.7 percent of global GDP. The pharmaceutical industry, according to the study, amounted in 2014 to about 9.4 percent of the global gross domestic expenditures (US$171,6 billion). “This is an indication of the high significance that pharmaceutical R&D has in the global context,” according to the study.

In terms of pharmaceutical R&D, in 2013, the largest contributors were the United States, Japan, China, Germany, Switzerland, Belgium, Spain, Denmark, South Korea, and France, according to the study.

The pharmaceutical industry devoted US$7.3 billion to basic research in 2014, almost as much as Germany’s total pharmaceutical gross domestic expenditures on R&D, the study found. Ostwald added that the investment of the pharmaceutical industry in basic research increased steadily, estimated at about 11 percent per year between 2010 and 2014.

Further Research Needed to Answer Key Questions

A number of questions from the audience were fielded by Ostwald, such as a question about the nature of the basic research conducted by industry. Ostwald said the study is based on published and publicly available data only, to kickstart a dialogue. It would be interesting to know where the pharmaceutical industry spends its money on R&D, when and for which reason, but it is not in the study, he said.

Tom Bombelles, head of non-governmental organizations and industry relations at WIPO, asked about the opening question, whether consumers actually pay twice. Ostwald answered that it was an ambitious goal to answer this question, and more time would be needed to explore that question. He added that the pharmaceutical industry is investing more and more in basic research, more than governments.

Katy Athersuch, from Médecins Sans Frontières (MSF – Doctors Without Borders), remarked that “quite a lot” of things can be incorporated into R&D expenditures, such as legal expenses for acquiring and defending intellectual property rights, commercial activities, and fees paid to doctors for participation in clinical trials, and asked if the study took those factors into account. Ostwald answered that only published data was used for the study and further research would be needed to explore this question.

Ellen ‘t Hoen of Medicines Law and Policy, and former head of the Medicines Patent Pool, asked whether greater transparency in R&D expenditure would benefit follow-on research. Ostwald remarked on the fact that the authors could only get data from 2014, and that the difficult part was to get global data.

Concluding the event, Greg Perry, IFPMA assistant director general, chairing the event, underlined the “large commitment of the private sector” on R&D, and in particular the increase in basic research. He said the “big question” is which model can be used to address issues such as new antibiotics, tuberculosis, and neglected diseases. He also highlighted the commitment of the industry to partnerships.

GHIT, Japanese Initiative, Investment Model

Kei Katsuno, senior director of the Global Health Innovative Technology (GHIT) Fund, discussed the lack of incentive for neglected diseases R&D. The GHIT, based in Japan and established 5 years ago, is focusing on creating an investment model and a financial incentive mechanism to advance global health R&D, he said.

The GHIT Fund is based on and promotes public-private partnerships, he said.  Roughly half of GHIT funding comes from the Japanese government, the rest being provided by pharmaceutical companies and the Bill and Melinda Gates Foundation, he explained.

According to Katsuno, the GHIT focuses on Japanese and non-Japanese entities, and on infectious diseases particularly affecting low and middle-income countries, such as malaria, tuberculosis, HIV, and neglected tropical diseases.

The GHIT has been joined by other actors, such as the United Kingdom’s Wellcome Trust, and more than 10 international pharmaceutical and diagnostics companies. Across every continent, over 40 Japanese organisations are working with 60 non-Japanese organisations in the global R&D space, he said.


Image Credits: Catherine Saez.

Combat the infodemic in health information and support health policy reporting from the global South. Our growing network of journalists in Africa, Asia, Geneva and New York connect the dots between regional realities and the big global debates, with evidence-based, open access news and analysis. To make a personal or organisational contribution click here on PayPal.